The original “Lucky Country” was Argentina. As I googled the term before writing this post, however, I found no trace of a link between the name and the South American agricultural giant.

Still, I began my international investing career in the mid-1980s with an Australian portfolio. In that Cro-Magnon time the Argentina/Australia comparison was common.

The idea for both nations was that they were endowed with abundant natural resources, but that this was a curse, not a blessing. That good luck spawned its opposite–excessive reliance on food/mineral production, insularity, dysfunctional government and resultant economic misery. In contrast, resource-poor places like Japan or Korea were blossoming as economic powerhouses.

the Dutch/Detroit disease

I stuck in the Detroit part. For me the Michigan analogy is much more current and powerful.

The Dutch “disease” was the discovery of gigantic offshore oil deposits. They required a lot of labor to develop–mostly strong backs and a willingness to spend long periods of time on floating oil development platforms.

The jobs required a lot of people, however, and paid maybe 3x normal wages. Combine that with a small national population and the result was soaring wages and, therefore, a mass migration of non-oil industries to other countries. When oil prices peaked in December 1980 and began a swoon that would reduce them by about 3/4, the oil business collapsed. Government finances fell apart and unemployment skyrocketed as laid-off oil workers couldn’t find new domestic jobs.

The “disease,” then, is small area and reliance on a single industry.

Detroit is the American equivalent, with automobiles instead of oil. The domestic auto industry grew fat and lazy in the 1970s-80s behind protective barriers erected against imports. It paid high wages that drove most other businesses out of the area. Heavy reliance on the “Big Three” car makers, corrupt government and the arrival of foreign auto manufacturers in lower-cost areas in the US eventually combined to drive the city into bankruptcy.

the Middle East

Economically, the typical oil producing country is Detroit in the desert.

Two twists on the all-eggs-in-one-basket theme:

— very young populations, meaning an imminent threat of significant youth unemployment; and

–a reluctance to allow women into the workforce.

Both probably turn them into Detroit on steroids.

I have no idea how this all works out. Dubai, which has no oil, is looking a lot smarter than it did six or seven years ago. The recent Saudi announcements of a radical restructuring of its economy are just the curtain being raised on what may be a lengthy, twisty-plot drama, I think.